Global satellite deals valuable as TVNZ profit falls

By SIMON HENDERY media writer

One of TVNZ's lower-profile subsidiaries appears to have played a big part in keeping the television side of the business in the black.

But Satellite Services did not even rate a mention when TVNZ announced its heavily reduced annual profit.

TVNZ's net profit fell by a third in the year to June 30 as the company endured a rough advertising environment and worked on transforming itself from a state-owned enterprise into a crown-owned company governed by a broadcasting charter.

Part of that metamorphosis has involved the company's split into two arms-length businesses - the television-focused TVNZ, headed by Ian Fraser, and Transmission Holdings, whose chief executive is yet to be appointed.

Both will be under the eye of the TVNZ group board. Its chairman is also yet to be appointed, following the departure of Ross Armstrong.

The creation of Transmission Holdings means the loss for TVNZ of its cash-cow transmission business, BCL, and of its growing international contracting business, TVNZ Australia.

As a precursor to the split, this year's annual report breaks down, for the first time, the transmission and television sides of the state-owned enterprise's business.

The television operation made a net after-tax profit of $5.1 million (down $2.7 million on the previous year). Transmission made $14.2 million (down $7.9 million).

Despite the tough advertising conditions experienced by broadcasters around the world, TVNZ says it "recovered well" in the second half of the past financial year, increasing full-year advertising revenue by $1 million to $285.7 million.

The factors driving the television business' bottom line included a painful, one-off $5.2 million write-off of the value of broadcast rights for next year's Rugby World Cup.

The accounts also show that "television satellite revenue" accounted for a further $46.1 million of revenue on the television side.

That revenue comes from two sources: Satellite Services - an international satellite linking business run out of TVNZ headquarters in Central Auckland - and income from the sublease of a satellite transponder that TVNZ secured when it thought it was getting into the digital television business.

Satellite Services, which organises one-off satellite links for broadcasters of sporting and other events around the world, is a lucrative business, and industry sources say it would be fair to assume that 15 to 20 per cent of its revenue ends up on the group's bottom line.

This means the "satellite" component could have added between $7 million and $9 million to the $5.1 million profit recorded by the slimmed-down, television-focused TVNZ.

TVNZ denies that without Satellite Services' contribution the television business would have made a loss.

"Both the television and satellite businesses are profitable," a spokesman said.

He said Satellite Services had important synergies with the television side of the business. These would be lost if it was considered a transmission operation.